Turn offshore networks into cash
For many startups, overseas investment is about more than just capital. It also opens up crucial access to networks and markets - and it brings credibility.
Companies like Lanzatech and Booktrack are notable for the way they have raised funds from overseas investors.
Attracting investment from Peter Thiel is helping Booktrack open doors in the North American technology sector, and noted cleantech investor Vinod Khosla is no doubt an important element in Lanzatech’s swift growth.
If a startup’s key markets are offshore, then that company - like Lanzatech and Booktrack - needs to be focused on those markets from day one.
Getting there is all about you and your advisors’ networks. And succeeding offshore is determined by thorough preparation.
Do your research and find which investors and funds have a real fit with your business. Focus on their sweet spot in terms of stage of development, pre-money valuation, preferred investment segments, market size and IP requirements and, importantly, geographical fit.
If a target investor hasn’t revealed a clear statement of these criteria, you can often work out their preferences by looking at their existing investments.
The contacts made from talking to offshore investors are often more valuable than domestic contacts, particularly if your business is trying to gain traction in key offshore target markets, with exit prospects.
If a business is targeting a Southeast Asian market, it would probably benefit from talking to Singapore-based investors. Some of Sparkbox's portfolio companies that have a focus on southeast Asia have worked with Jungle Ventures, a Singaporean venture capital fund.
The same logic applies if you are targeting Europe or the US - seek target market investors with strong networks.
The likelihood of raising offshore capital is heightened if you can identify investors who are prepared to, and have actually, invested in New Zealand companies before.
Some will, but many won’t, because they prefer local opportunities.
Your chances of raising offshore investment will also be boosted if your business has a presence in your target market.
If the US is the target investor location, you could look at joining the Kiwi Landing Pad in San Francisco.
Attracting offshore investment is all about de-risking the opportunity for the investor, to the same level they would encounter by investing in a local company.
Networking is crucial. An introduced opportunity is 100 times more likely to be successful than a cold call or an unsolicited approach.
Networks need to contain people with sufficient public profile in offshore investment. Most offshore investors prefer to see a strong New Zealand co-investor also involved in your company.
The Global from Day One Seed Fund (GD1), which Sparkbox Ventures is part of and manages, is based on the belief that New Zealand startups need to have an immediate offshore focus if they are going to achieve the growth and scale to become significant companies.
GD1 works with its investee businesses to get them into offshore target markets from day one, to seek funds from active networked investors located in these target markets, and to do so in combination with strong and experienced New Zealand co-investors.
Targeting offshore funders in key markets to co-invest with experienced New Zealand investors should be the funding goal of all New Zealand startups.
Properly executed, this formula delivers the full package - local and international networks, target market presence, funding and a much more useful rolodex to help drive your company’s global success.
Andrew Duff is the chairman and co-founder of Sparkbox Venture Group. www.sparkboxventures.com